Home Buying in 08002>Question Details

Housemami, Home Buyer in Cherry Hill, NJ

How much of a percentage drop off the listing price is average in todays market when making a bid on a short sale property? 10%, 20%, 30%, etc

Asked by Housemami, Cherry Hill, NJ Fri Mar 18, 2011

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Each property must be looked at on it's own merits. Location, Condition, Price. If you are using a real estate agent make sure they are experienced in the short sale process. A buyers agent will be able to interview the seller agent to find out if the short sale is not a waste of your time. Critical processes must take place before any short sale can be entertained as a listing. Liens, judgments, first mortgages, secondary mortgages and third must all be considered in any short sale process. If you are using a buyers agent, even using the selling agent as your representative, they must know short sales. If either side is not experienced you may fighting a losing battle. Each bank has a different package and process to be submitted. But way before the submit of a short sale package, the listing agent must qualify the short sale. An experience buyers agent will be able to qualify the short sale up front with an interview process of the listing agent. And Require such information documented. This is very important.

Buying A short sale can be a good deal, but it can be your worst nightmare if the agent is not experienced. These are the deals that you hear take 6 months to a year before you find out a bank deny's the short sale.

Some shorts are priced high some are priced low. A bank will know the market area for each house. They don't accept arbitrary dollar offers just because it is listed that way. It must be justified. And the bank will send appraisers and order many BPO's to confirm values. With an experienced agent you should have an answer to your offer in 20-35 days or less. But that cannot be set in stone either since there are so many variables to each property.

Use and experienced short sale agent !

Larry Sarlo CDPE
Certified Distressed Property Expert
Weichert Realtors

2 votes Thank Flag Link Fri Mar 18, 2011
Bidding on 'short sale' properties today shouldn't be looked at in the terms you suggest. As the market has continued to evolve, banks have become more savvy, better organized and in better touch with the marketplace in which their properties are competing. Today's banks are saying "no" to offers that do not meet their financial threshold. Besides, sometimes there are multiple liens on a property which require the first lien holder to negotiate with subordinate lien holders to clear title and pass the property. Ultimately you should consult a Realtor who knows the area (like myself), the market and familiar with the 'short sale' process. It can take a Buyer many months to find out that their 30% below market offer price was just a wast of everybody's time. Especially the Buyer who lost out on 5 other well priced homes over the same time period thinking they would score big. Short Sales are an oxymoron. They should really be called 'Long Sales' or 'Long Shots' because it typically takes 4-6 months to get the bank to answer your bid. I've been on the buying and selling end of these sales (including properties in Cherry Hill). They are difficult, challenging, frustrating and time consuming. They are not 'Short'.
2 votes Thank Flag Link Fri Mar 18, 2011
You should do your due diligence and get the comps in the area before just looking to take of f a percentage.

Most short sales are priced already under market value and at the list price may not even be accepted by the bank. Be smart and consult a Realtor that understands the short sale process and ca give you proper comps to make an educated decision.
2 votes Thank Flag Link Fri Mar 18, 2011
Regardless of what the answer is, the bottom line is how much do you want to pay for the property, who cares if what you want to pay is less then asking price and if that difference is within reason based on percentages of other sales data. What you should be focusing on is determining what the property is truly worth and what would you pay for it, instead of figuring out what you should pay for it based on what others have purchased their short sales properties. Paul I doubt your hiroglyphics are enlightining, I don't understand them and I'm a numbers guy so I can imagine what this person must be thinking about your answer.
Web Reference: http://www.sjrates.com
1 vote Thank Flag Link Sat Mar 19, 2011
Hi there, just had a discussion with a number of agents and an attorney that is very involved with short sales. The consensus was that banks are looking for numbers that are within 10% of market value. So if the home is priced properly then I'd use a range of list price to 10% off of it as the gauge. Your agent can help you assess whether it is priced properly vis a vis market value.

Jeanne Feenick
Unwavering Commitment to Service
Web Reference: http://www.feenick.com
0 votes Thank Flag Link Sat Mar 26, 2011
Thanks Paul, I thought something wasn't right and thats why wasn't understanding it and I was thinking how could this other person be getting it when I know I'm pretty good with numbers. I'm glad you were able to get it straightened out.
Web Reference: http://www.sjrates.com
0 votes Thank Flag Link Wed Mar 23, 2011
Thanks Jerry. I went back and looked at my answer again. I made a mistake. (correction is below-- I had done the calculation correctly but wrote the explanation in reverse) Maybe now it will make sense to you - but I'm thinking that is not the reason you didn't get it. Oh well. This is a pretty standard calculation that I have done many times for clients. Those that are interested in numbers actually do get it -- sometimes they actually ask for it. Some people want to know how I got the number - others just want the number. ( If the original price of a house is 100,000 and the sold price is 94,000 the ratio of sold to list is 94/100=.94 ie the house sold for 6% off the list. Do this for the whole set and you can get the average discount.) Of course then there is the issue of what the actual original bids were and that number we can not know except for those we were involved in ourselves. The average original bid, of course, would be lower than the average sales price.

Actual stats based on the 38 short sales reported in TREND MLS data set for the last year:
The AVERAGE (mean) original price to sold price ratio (this should be Sold/ original list)= ~.8230266 (ie ~18% off original list on average) ranging from .45 to 1.06
the median was: ~.8050744

The AVERAGE (mean) list (at time of sale) to sold price ratio (this should be sold/list)=~.9526176 (ie ~5% off list on average) ranging from .7718120 to 1.0787026
the median was .9304347
0 votes Thank Flag Link Sat Mar 19, 2011
Paul relax, I'm not trying to step on your toes over their in Cherry Hill, I was merely offering you some constructive criticism by saying that I feel your answer may have been to complex thats all. You didn't have to take it the wrong way or even a step further and try to undermine me by saying that "anyone" who could read or write could understand your answer.
Web Reference: http://www.sjrates.com
0 votes Thank Flag Link Sat Mar 19, 2011
Jerry, when someone asks a numbers question I expect they want a numbers answer. My answer is easily understandable by anyone that has had at least one course (that they passed) in college (or even high school) statistics.

It is rather an easy calculation and if Housemami in interested in numbers (which is all the questioner asked for) - (including those for comps) I can provide them along with a lot of additional research.
0 votes Thank Flag Link Sat Mar 19, 2011
oops I can't edit - I said 10% higher than the purchase price - meant to say 10%+ higher than the LISTING price!

Good lucke!
0 votes Thank Flag Link Sat Mar 19, 2011
I don't know what is going on in NJ but I can tell you what you need to do in Las Vegas in order to close a short sale successfully on the buy side.

There are too many variables to getting a short sale closed on the listing side - each transaction is like a fingerprint no short sale transaction is the same.

One of those variables a buyer can control is price & terms. You need to analyze closed comparables and strategically figure out where pricing needs to be. The lienholders do order many BPOs and Appraisals so they know what the property is worth. Strategically - you need to be looking from their standpoint and attempt to figure out the numbers on the low end that they are looking at.

Sometimes here those numbers can be 10% PLUS higher than the purchase price. Sometimes they are lower. Hopefully you are or you are working with a professional who is a master in the pricing department of real estate.
0 votes Thank Flag Link Sat Mar 19, 2011
Actual stats based on the 38 short sales reported in TREND MLS data set for the last year:
The AVERAGE (mean) original price to sold price ratio= ~.8230266 ranging from .45 to 1.06
the median was: ~.8050744

The AVERAGE (mean) list (at time of sale) to sold price ratio=~.9526176 ranging from .7718120 to 1.0787026
the median was .9304347

This may be enlightening but also may be less useful that it appears. Between the original listing price and the eventual list at time of sale were (in most cases but not all) a whole series of price reductions. When you are looking at a home that is currently listed it will not necessarily be clear where the eventual price will go. Good comparables are required to make a sound decision. I also have days on market for each of these homes which will shed more light on the issue - as will condition of the home. Call me if you are serious and interested in buying. (2 of the 38 were handled on the buyer side by my office)

Paul Howard, Broker
NJHomeBuyer.com Realty
Cherry Hill NJ 08002 - 856-488-8444
0 votes Thank Flag Link Sat Mar 19, 2011
Bottom Line is to offer not quite what you are prepared to pay for this property. Banks often come back with higher counter offers after the do another BPO. This is so subjective, so the best advice as stated before, know the market value, be prepared for a "long haul", negotiate your "almost" best deal you are comfortable with,get your own financing done without locking yourself in, use a good and knowlegable Realtor and be PATIENT!
0 votes Thank Flag Link Sat Mar 19, 2011
There's no written rule. The bank is looking to recover the maximum that home is worth. Once you determine market value for a home (based on location, condition, amenities etc) then make your best offer and wait until the bank decides. I'm in the middle of a couple of short sales right now and its a waiting game. Keep in mind that if the bank approves the short sale with stipulations that the seller can't meet then the deal dies and you get your deposit back. Are you ready for the ride? Call me and we'll take it together. The end can be very rewarding.

Jodi 2152757301

0 votes Thank Flag Link Sat Mar 19, 2011
I'm sorry for not saying this before, Remember this seller might be in a really bad spot (wife died, lost his and has three kids). Your Realtor will be able to tell you alot about the past history and do your homework. Just remember the human factor in this.
0 votes Thank Flag Link Fri Mar 18, 2011
In some instances buyers pay OVER list price each property stands alone
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Fri Mar 18, 2011
There is not really a percentage price the bank has a number that they want, so go low. If you do not know how they work. I'm sorry if you do, but more people will read this than you. Seller accecpt's price than gives it to the bank and than they will make the final decision on what they will take. Some time's banks would rather let the home go into foreclourse than take a shortsale ( than they can go after the seller for the difference in court). So start low and see where it goes all you can be told is NO. Hope this helps if you want to talk more click on my picture and there will be more info.

Shawn Anderson
0 votes Thank Flag Link Fri Mar 18, 2011
Depends on your market area. Currently in my market you don't offer under asking if you want a decent property because the supply to the demand is so low. The only time you bid under asking is if the property is severely distressed. Consult a Realtor in your area to look at comparables before you make an offer.

Good Luck!
0 votes Thank Flag Link Fri Mar 18, 2011
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